Posted by Helen Lucas, Solicitor
Are employment contracts necessary?
Documenting an individual’s terms of employment creates certainty in the employment relationship. But in fact, it is also a legal requirement.
As an employer, you must give a written statement to your employees within two months of them starting their employment, setting out their basic terms of employment. This is known as a “section 1 statement”. The statement must reference things like: pay, hours of work, pension information and disciplinary and grievance procedures.
Section 1 statements contain the minimum terms set by the Employment Rights Act 1996, so they are not specifically drafted from the employer’s perspective. Consequently many employers include additional terms to provide the business with more protection.
Providing a contract of employment is generally more advantageous, as it enables you to cover extra issues. Consider the importance of clauses on confidentiality, company property, the right to overtime or to make deductions.
Don’t be put off issuing an employment contract because of the upfront costs in having it prepared. Incurring the cost of bespoke employment contracts in the short term can invariably reap rewards in the long term. It enables you to ensure that certain types of jobs are being dealt with consistently across the business. More importantly, they help to minimise the likelihood of legal disputes arising as a result of unclear terms. Employment contracts should be revised when individuals take on new roles, or if the business changes or grows.
Beware, there can be financial consequences of not providing a section 1 statement. If an employee wins a claim in the employment tribunal against their employer, it is possible to tag on an additional claim if the employer has failed to provide them with a section 1 statement. Unless there are exceptional circumstances, the tribunal must make a minimum compensation award of two weeks’ pay (capped at £978 from 6 April 2017). It may however make a higher award of four weeks’ pay (capped at £1,956 from 6 April 2017) if it considers it is fair in the circumstances.
If you want to know more about drafting or updating existing employment contracts, our Swindon HR Training workshops starting on 25 April will be an opportunity to discuss this, and other related recruitment issues.
Employment & HR
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